Firm, steady flax prices seen in the cards

CNS Canada — Farmers with flax in the ground should be pleased come autumn.

Statistics Canada revised its seeded acreage estimate downward in late June and that, combined with lower carryout stocks and several other factors, should bring strong prices.

“Given the demand in the market from China, the United States and potentially even the European Union, I really think demand for flax is going to be strong,” said Wayne Thompson, executive director of the Saskatchewan Flax Development Commission.

StatsCan reported 885,000 acres of flax seeded in its June report, down from 1.04 million last year and 941,000 in 2016.

The shortfall of about 100,000 acres compared to a year ago, combined with acreage declines in North Dakota, the key flax-producing region in the U.S., EU issues with flax from the Black Sea region exceeding maximum residue limits for pesticides and good Chinese demand should hold flax prices reasonably high, Thompson said.

“The demand from China, I can’t say it’s taking off yet, but the interest in China continues to grow,” he said.

Brennan Turner, CEO at FarmLead, an online grain marketplace, said he too is bullish on flax.

Flax posted price gains of four percent in June, he said, and he expects a continued steady performance.

“We’re not saying like it’s wildly bullish, like it’s going to be $20 or anything like that, but keying into that $13 range certainly is a possibility.”

Flax currently sells for about $12 per bushel.

“So pretty positive, but again, the market is playing pretty hand-to-mouth, if you will, and this is just a little more sentiment as to where prices could go and relative to ending stocks that we’re seeing right now.”

Flax stocks as of March were reported to be 327,000 tonnes, down from 417,000 at the same time in 2016.

Thompson said his optimistic outlook already factors in competition from Kazakhstan and Russia. Those countries have steadily increased flax production over the last three years and are wooing Chinese buyers, which will limit gains for Canadian flax.

However, the push for healthier diets from a growing middle class in China will continue to pressure supplies, he said.

Thompson said the crop in the ground has started off well, although most plants could use a nice rain. He cautioned that the recent hot spell will have to ease soon.

“The crops are not doing so well these last few days to a week, with the 30-plus or close to 30-degree days.”

Turner added he’s heard concerns about the reliability of the U.S. market because that’s where a lot of the Canadian crop usually goes. But he said the supply/demand fundamentals remain positive.

This year’s seeded acreage estimate marks a 29 per cent decline from the five-year average, he said.

Thompson said that number includes the highly successful peak year in 2014, when farmers seeded 1.605 million acres. The numbers have come down steadily since.

“We’d like to hit that high again.”

Many farmers saw strong prices the year before and flax seemed like a good economic decision. Two years later, lentils became the darling and flax acres fell to 941,387.

“More people grew lentils that year, purely based on the expected profit,” Thompson said.

Lately, he said acreage has remained relatively steady and most of the present change is due to Manitoba acres shifting into soybeans. Saskatchewan and Alberta have remained roughly steady.

— Terry Frieswrites for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.